How Groks come into existence

The nature of the Grok

The Grok is an interest-free user-emitted and secured currency. The Groks value is independent of any
other currency; it has been designed to be completely trustworthy.

User-emitted (or user-issued) means that Groks
are not created by any central authority, but rather by the participants
themselves. They do this in our case by making use of a
Grokcreation facility, which they must first earn by providing something of value to the ReeComm.

In contrast to many other trading communities, this one does not give
away a starting balance in the beginning, nor does it grant creation facilities
without the members providing some sort of value or security for them. Failing
that, a member can still first earn Groks and then
spend them. The security requirement creates justified trust in the trade
currency.

Curious why we suggest the outlandish sounding term
Grok as the currency name? An FAQ links to the
origin and meaning of the word – it will help you to grok the reasons for this!

New terminology for a new understanding

Experience has shown that new or little-known ideas will be interpreted by
people according to what they are familiar with. For example, if your
bank account has a negative balance then this is something bad, it is a loan
or an overdraft, something you owe to the bank. You're in debt.

But a negative balance on a Grok account cannot
be classed as a loan, since there is no central authority creating any currency
which could be loaned. Therefore a loan of currency in the classic sense is
literally not possible. What one can say is that the account owner has
currently received more value of goods and services from the market community
than she has supplied, but that has nothing to do with a loan of currency.

In the Grok system, the users of the currency
CREATE the currency themselves – at the moment they go into a negative
balance to remunerate their receipt of goods or services. If no member does that,
no actual currency even exists.

Since nothing is being loaned - but rather created - the conventional term
"lender" also does not apply. To whom should it apply? No-one has lent any money
to anyone to pay a bill, the person in obligation to pay the bill has simply
herself created the money to pay it. Confusion may arise, when viewed from a
conventional way of thinking, since each member of the marketplace has only one
account. With a negative balance, the account owner has at that time created that
many Groks, which are now a positive balance on
someone else's account.

That is why we call a negative Grok balance a
creation balance and a positive balance an entitlement balance.

This mutual credit mechanism is in stark contrast to conventional banking,
in which some people or authority claim a monopoly on the right to create money,
and then lend it to citizens as debt and for interest. With mutual credit
people are simply creating the currency they need themselves –
interest-free.

Perhaps you may now be feeling uneasy – the logic of the above may
seem right but goes against common knowledge, or it can't be right because
we've all known for all our lives that only banks can create money. But the
stories we each tell ourselves about the way the world is, and what is right
or wrong, are simply the ones we've been hearing all our lives, or the ones
which belong to the general consensus. New stories can by nature never be as
familiar as ones we've been hearing every day, but that doesn't make them
wrong. For the moment at least, we ask you to try and keep an open mind.

Security, Liquidity, Account closure

To prevent abuse of the system we have stipulated that members must earn
the right to create Groks, i.e. they must give
something of value into the ReeComm, or deposit it, in order to have such
rights assigned. Such securities may be: Deposited finance certificates,
creation rights in trade for national currency, documentation of work
performed for the ReeComm, or mutual guarantees of members in small groups.

The value of her securities limits how much a member can go into a below-zero
balance – if she gives nothing, the limit is zero, if she gives or deposits
little, the limit is small, for more the limit is correspondingly higher. But
this limit, noted as an attribute of the Grok account,
is NOT a credit limit, since no-one is giving money as credit. Rather it governs
how many Groks the member can personally create –
otherwise everyone could just create as many Groks as
they need and nobody would do any work.

At the same time, it is necessary to ensure enough
liquidity in the market community that trade is not stifled by lack of currency.
For this reason we have foreseen a range of possibilities to acquire a
Grokcreation facility, such that a member can
combine the methods provided and thus in sum acquire a fairly large yet
fully justified mandate to create Groks.

If an account must be closed but has an open creation balance, then that
member has taken more value from the Marketplace than they have contributed.
But they have NOT taken more value out of the ReeComm than they have
contributed – that's why we require the security. In such a case the security
is called in, taken possession of, or exercised (depending on its exact type) in
order to convert it to Groks and thus bring the
account's balance to zero – only after which it can be finally closed.

Example of using a creation facility

Ms. Jones looks after the kids of Ms. Smith for 20
Groks. Both women have a zero balance on their
trade accounts. Ms. Smith then uses her creation facility and transfers 20
Groks to Ms. Jones. The 20
Groks now being credited have been created right
at this moment in time. If Ms. Jones now goes and buys vegetables for 12
Groks at the greengrocers, whose trade account
balance then shifts from -150 Groks to -138
Groks, then the 12 Groks
have disappeared from circulation again at that moment.

Comparison of Grok
to national currency creation

Since every Grok account starts with a zero balance,
and the market participants themselves create the currency according to their own
necessity, the Grok provides no impetus of its own
when activities are balanced. It's very illuminating to compare that to the
prevalent mechanism – we'll use a trivial example to make things clear:
On a pristine market member A sells goods to member B for 20 units, and then
B provides a service to A, also for 20 units.

The Grok way

Member B must have already provided something of value to the ReeComm
and has received a Grok creation facility in
corresponding value.

Member B now uses her creation facility and transfers 20
Groks to member A.

Member B now has a balance of -20, member A of +20.

Subsequently, member A remunerates member B with 20
Groks.

Both members again have a balance of zero, as pristine as before
the market place was ever opened.

The national currency way

Remember that we are assuming a pristine market with no
money already created.

The central bank lends money to a commercial bank – for
interest. Lending implies debt, that principal and interest must
at some point be repaid.

The commercial bank lends 20 units of this money to member B
– for a higher interest. Again, lending implies debt, that
principal and interest must at some point be repaid.

Member B now pays the 20 units to member A.

Member B now owes the bank 20 units plus interest,
member A has 20 units.

Subsequently, member A remunerates member B with the 20 units.

Member A now has no problem; but member B has 20 units in her hand
and owes the bank 20 units plus interest. So she repays the bank the
principal and must borrow the interest from the bank to fully repay
the loan – i.e. a new loan to repay...

So whereas the commercial transactions are completed, the financial
story is not – the currency is creating a pressure on the real
economy.

Admitted, the above scenario is overly simplistic – interest received
by banks and governments is actually spent back into circulation, so "even" a
compound interest system could theoretically be run as a perpetuum mobile. Yet
factors such as rewarding the amassing and hoarding of wealth do in effect lead
to an exponentially expanding volume of money, with most of it accumulating in the
hands of a rich few individuals and concerns, as current events bear witness.